Jay transferred his farm land to an LLC in exchange for a 50% interest in the capital, profits and losses. His basis in the land was $600,000 and its…

Jay transferred his farm land to an LLC in exchange for a 50% interest in the capital, profits and losses. His basis in the land was $600,000 and its fair market value was $1,000,000. At the time of the transfer there was $20,000 in real estate taxes payable. Ira contributed $1,000,000 cash and received a 50% interest in capital, profits and losses. The land was subdivided into 40 lots priced at $75,000 each. In year 1 the partnership had cash disbursements as follows: $20,000 for the accrued real estate taxes, $800,000 for land development, $140,000 for advertising, and $20,000 for the accrued taxes. Selling expenses of $5,000 per lot were paid as each lot was sold. In year 2, the only expenses were $5,000 selling expense for each lot sold, $40,000 property taxes, and $30,000 in advertising. In year 1 the LLC sold 25 lots at the asking price. In year 2 the LLC sold the remaining 15 lots for the asking price. How do you calculate the LLC’s taxable income for each of the two years?